Gruma S.A.B. de C.V.

October 1, 2010
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Corporate Profiles

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Currency fluctuations led Gruma, S.A.B. de C.V. to record a loss of 65 million pesos ($5,062,305) during the second quarter of fiscal 2010, ended July 28. The results marked a significant reversal compared with the same period during fiscal 2009 when the company recorded net income of 1,481 million pesos ($115,342,679), equal to 2.36 pesos per share on the common stock.

Sales for the company declined 5% compared with the same period during 2009 to 11,723,000,000 pesos ($913,006,230).

The company attributed its loss during the second quarter of fiscal 2010 to the depreciation of the Mexican peso and lower operating results. It added that its earnings during the second quarter of 2009 were bolstered by the appreciation of the Mexican peso.

Currency fluctuation has been an ongoing story for Gruma, a company that manufactures tortillas, corn flour and corn chips, and whose business extends throughout the world. The United States and Europe account for 47% of company sales followed by Mexico (27%), Venezuela (18%), Central America (6%) and Asia and Oceania (2%).For the full year of fiscal 2009, ended Dec. 31, 2009, Gruma posted net income of 2,097 million pesos ($163.6 million), which compared with a loss of 11,818 million pesos in the fiscal year ended Dec. 31, 2008.

The difference in year-over-year results was attributed to losses in the company’s currency derivative instruments in fiscal 2008. Sales in 2009 totaled 50,489 million pesos ($3,939 million), up from 44,793 million pesos in fiscal 2008.

In his letter to the company’s shareholders in Gruma’s 2009 annual report, Roberto Gonzalez Barrera, chairman of the board and chief executive officer, said, “During 2008 we faced a problem that we had previously not seen through our long history. Given our globalization, we have long worked with hedges in currencies, raw materials, and finished products. Due to an unusual depreciation of the peso, which went from 9.85 pesos to 14.50 pesos per dollar, all of the companies that we operate in Mexico that had exchange rate derivatives were affected.”

Gruma Corp. is the company’s business unit responsible for the United States. Its primary brands in the United States include Mission, Guerrero and Calidad. In 2010, the company extended its tortilla line with the launch of a 100% whole wheat flour tortilla. In late 2009 the company also announced plans to expand its tortilla plant in New Brighton, Minn., by 45,000 square feet to 145,000 square feet. The new space is being used for additional dry and refrigerated product storage.

In May 2010, the government of President Hugo Chavez of Venezuela said it was expropriating the property and assets of Molinos Nacionales CA, or Monaca, from Gruma. But in July, government officials said they were not expropriating the business and, instead, were in talks with the company to develop a joint venture.

The takeover action had been linked to steps taken against Ricardo Fernandez, a banker who is a minority shareholder in Monaca. Venezuelan authorities accused Mr. Fernandez of inappropriate banking practices. In December 2009, the Venezuelan government named a representative to the Monaca board in connection with the actions taken against Mr. Fernandez.

Gruma Venezuela, comprising Monaca and a second subsidiary called Demaseca, is the second largest corn and wheat miller in Venezuela, operating 13 mills. CP